Enterprise Bill

Public Bill Committee, 30 April 2002.

Standing Committee B

Clause 20 - Duty to make references in

Derek Conway (Conservative, Old Bexley and Sidcup)

Order. Before I call the Minister to resume the debate, I remind the Committee that when we meet tomorrow—unusually instead of Thursday—it will be at 10.30 am and at 4.30 pm and not at the normal Thursday times. Not every hon. Member was aware of that.

Nigel Waterson (Conservative, Eastbourne)

On a point of order, Mr. Conway. I am grateful for the welter of letters from the Under-Secretary, some of which are extremely useful, on matters of guidance, draft regulations, and the failing firm issue that was raised last week, but we are entering the territory of a substantial and growing number of Government amendments. When I predicted that there would be many Government amendments, looks of practised scepticism came from those on the Government Benches, but the last tranche was around 40. It would be helpful to know from the Minister how many more Government amendments we should expect, and from you, Mr. Conway, whether, if the number reaches three figures, we would need another meeting of the Programming Sub-Committee. Given the inadequate time that we already have for debate, we may want further to extend the time for dealing with Government amendments.

Derek Conway (Conservative, Old Bexley and Sidcup)

Order. Those are not matters for the Chair. The Government must table amendments and new clauses as they see fit and the House will consider them when the Committee reports. The Under-Secretary will have heard the hon. Gentleman's comments. If she wants to respond, I shall call her. Otherwise, we shall continue with the clause stand part debate.

Melanie Johnson (Labour, Welwyn Hatfield)

I am sure that the hon. Member for Eastbourne (Mr. Waterson) has read the useful pieces of paper that I have sent to him and other hon. Members and will know that many of the amendments are of a minor, technical and consequential nature. That has been clearly explained.

At the close of debate on Thursday afternoon, I was dealing with the question of national champions. I shall be brief in my summary, as today's debate, after guidance from the Chairman on Thursday, will be on the principles that relate to clause 20 because many of the detailed matters have been discussed already at length.

Evidence from Professor Michael Porter and other distinguished academics shows that vigorous domestic rivalry is crucial for equipping firms to compete internationally. Arguments suggest that the solution is to nurture one or two firms to become flag carriers for a certain industry, which makes them of sufficient size to challenge foreign rivals. We reject that approach. It is not the way ahead.

I shall turn to the key features of the regime, which are included in the clause and were covered in a previous debate. The Office of Fair Trading will refer cases that it believes are completed mergers, which could result in a substantial lessening of competition. The narrower competition-based test will replace the broader public interests test that is applied by Ministers under the Fair Trading Act 1973. That change reflects our view that it is important to ensure that the OFT takes reference decisions on competition grounds.

We have provided flexibility to ensure that the system operates effectively. In particular, we want the OFT to be able to choose not to refer a merger where it believes that the market concerned is not of sufficient importance to merit a full stage two inquiry, or where it believes that customer benefits flow from the merger that outweigh the disbenefits of a substantial lessening of competition. The clause also provides for no reference to be made where the case is being dealt with in another way. Examples include cases that fall to be considered under separate regimes, such as newspaper mergers or mergers that qualify as concentrations under the European merger regulation. The OFT is prevented from making a reference under the clause if it is considering whether to accept undertakings in lieu of reference from the parties, or if the case is the subject of an intervention notice because it raises public interest considerations beyond competition. Those provisions will ensure that cases that cannot be dealt with effectively at stage one will be referred to the Competition Commission for a thorough investigation.

The key features of the regime will be that mergers will be assessed against competition tests, that decisions will be taken by independent competition authorities rather than by Ministers, that there will be changes to the criteria under which mergers will qualify for investigation, that there will be a statutory right of appeal against certain decisions, that Ministers will be involved only in exceptional cases in which national security issues arise and, as I mentioned last week, that that follows the best practice from countries such as the United States of America, Canada, New Zealand and Australia.

The key benefits to business will be a clear, consistent and predictable merger-control regime. There will be greater transparency because authorities will be required to publish reasons for their decisions. The Competition Commission's provisional conclusions procedure means that there will be open discussion of how to deal with competition problems and the statutory maximum timetables for merger investigations will create a certain time frame.

The new turnover criterion will be more focused on competition concerns than the previous test. That figure has been supported by a number of bodies such as the Institute of Directors, the City of London Law Society, Slaughter and May, Freshfields and Richards Butler. We are moving to a more transparent, clearer and more timetabled regime from which political considerations will be left out.

Andrew Lansley (Conservative, South Cambridgeshire)

I admire the Under-Secretary's desire to be brief. Having had an opportunity to read last week's debates on clause 20 stand part, she will know that I raised two issues. The first was how the new regime will address who are fit and proper persons as part of a competition test as distinct from the previous public interest test. The second was the treatment of overseas acquisitions, particularly by state-owned enterprises from other countries. The Under-Secretary has chosen not to deal with those points and has treated them as if they were of no importance. On past precedent, however, such cases have been important and have attracted a great deal of public attention.

Melanie Johnson (Labour, Welwyn Hatfield)

I am surprised that the hon. Gentleman has further raised those points. I am happy to write to him about them because that will be the most productive way to take them forward.

Andrew Lansley (Conservative, South Cambridgeshire)

I am grateful to the Under-Secretary and no doubt I will be much informed by her letters in due course. I doubt whether that will be to the Committee's convenience, however. The point of having the Committee is for issues raised in debate to be responded to in debate rather than separately. It appears likely that we will have to take up the time of the House on Report to deal with such issues when we should have been able to clear more of them away in Committee to concentrate on a few essentials later.

Question put and agreed to.

Clause 20, as amended, ordered to stand part of the Bill.

Clause 21 - Relevant merger situations

Jonathan Djanogly (Conservative, Huntingdon)

I beg to move amendment No. 215, in page 11, line 46, leave out '45' and insert '70'.

The concept of a de minimis threshold is, of course, vital to the process of the competition regime to avoid clogging up the workings of the OFT, stopping small businesses doing what they have to do and submitting such businesses to unnecessary regulations. Those provisions are not in place to stop businesses competing against one another. Indeed, it is quite the opposite: they are here to ensure that competition is encouraged in such a way that consumers and other businesses are not hurt.

How did the Government arrive at the figure of £45 million to be used as a de minimis? I would also be grateful if the Under-Secretary would give comparisons with other countries, as those are relevant to what happens in this country. We should

also appreciate that the regime under discussion is already being used in other countries. The £45 million figure seems very low, particularly when one considers the 25 per cent. market test in the Bill. In large markets where many competitors do not come within the 25 per cent. market share, mergers could nevertheless be dragged into the regime in circumstances where it was not a relevant issue.

The CBI has suggested that the figure be raised from £45 million to £70 million. I do not know how scientific that figure is, although it does come from an organisation that has a lot of experience because its members are subject to the competition regime, and is therefore worthy of proper consideration. I would finally note that clause 26 provides for the Government to change the figure if necessary.

It is important that we have a figure at the outset that is acceptable to business, as well as appropriate to the regime, in order that the system is fair and transparent.

Melanie Johnson (Labour, Welwyn Hatfield)

When we devised the turnover test, our intention was that it should catch roughly the same number of merger cases as the asset test does at present. In fact, research carried out by the Department of Trade and Industry suggested that the figure of £45 million roughly equates to £70 million in assets, hence the figure that we have chosen. We do not propose to change the figure, although obviously we have the opportunity to see how it works out in practice. Opposition Members have my assurance that we are not looking to catch any more than the present regime does.

Jonathan Djanogly (Conservative, Huntingdon)

On the basis that £70 million was seen as acceptable for an assets test, why is that figure not acceptable for the test that is being used?

Melanie Johnson (Labour, Welwyn Hatfield)

Clearly, there is not a straightforward one-for-one correlation between assets and turnover. I do not understand the hon. Gentleman's point. In 2000, we carried out research on the levels of turnover and assets of 110,000 UK companies. The data showed that the number of companies with a turnover of £45 million roughly equated to the number that had assets of £70 million, as I have said.

Andrew Lansley (Conservative, South Cambridgeshire)

For clarity, when the Minister refers to £70 million, is she referring to worldwide or UK assets?

Melanie Johnson (Labour, Welwyn Hatfield)

It is a worldwide figure. If hon. Members are interested and feel that we may have erred on the wrong side in the matter, the research showed that £42 million was a better equivalence, so we have decided to err on the side of catching fewer by upping the figure to £45 million, in any event.

As the hon. Member for Huntingdon (Mr. Djanogly) recognised, that system will be monitored and the OFT will advise the Secretary of State from time to time as to whether it is still appropriate. As hon. Members are aware, the level can be changed by order if necessary. We are not seeking to increase the work of the OFT in some gratuitous way. We have picked the figure as carefully as we can. Experience will tell whether we have got it exactly right, but we believe

that we have. I ask the hon. Gentleman to withdraw the amendment.

Jonathan Djanogly (Conservative, Huntingdon)

On reflection, I am not sure that we have heard the best justification of how the figure of £45 million was reached.

Melanie Johnson (Labour, Welwyn Hatfield)

Perhaps the hon. Gentleman can clarify what reasoning he would see as best, other than research based on 110,000 companies and, in trying to get the figure exactly right, erring on the right side?

Jonathan Djanogly (Conservative, Huntingdon)

I thank the hon. Lady for pointing that out. In effect, she has said that new technology companies, which tend to have a small asset value but a higher turnover, will be prejudiced in comparison with old industries—I do not like to use the phrase smokestack industries—which might have a higher asset value but a much lower turnover. In other words, the Government are prejudicing legislation against new technology companies in favour of older companies.

Mark Field (Conservative, Cities of London and Westminster)

Perhaps my hon. Friend might like to comment on the view that it would have been more logical to try to catch a certain proportion, within the 110,000 companies surveyed. The rather arbitrary use of numbers, instead of using a percentage of UK companies, seems to be without genuine explanation.

Jonathan Djanogly (Conservative, Huntingdon)

My hon. Friend makes a good point. Indeed, in other classification systems, such as that used by the stock exchange in the test to determine the class of a merger, there are a range of different tests—an asset-based one, a turnover-based one—to apply to different types of industry. Yet in reviewing this legislation, the Government seem to be concentrating just on a turnover test. It would be helpful for the Under-Secretary to give us comparisons with other countries that have similar tests, as I requested in my opening remarks.

Melanie Johnson (Labour, Welwyn Hatfield)

I would not want to promise the hon. Gentleman any such comparative data because it is probably not available in a comparable form.

I remind hon. Members that the purpose of the test is to ensure that we focus on companies with economic significance. In the two consultations on the mergers regime that took place throughout 1999 and 2000, businesses broadly welcomed the change. I believe that it is the right change to make.

Jonathan Djanogly (Conservative, Huntingdon)

Having heard the Under-Secretary, although I am still not entirely convinced, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Nigel Waterson (Conservative, Eastbourne)

I beg to move amendment No. 65, in page 12, leave out lines 7 to 46 and insert—

''( ) The condition mentioned in this subsection is that the merger would create or strengthen a share of 25 per cent. or more in any relevant market in the United Kingdom or a substantial part of the United Kingdom''.

Derek Conway (Conservative, Old Bexley and Sidcup)

With this, it will be convenient to take amendment No. 131, in page 12, line 7, leave out from ''that'' to end of line 46 and insert—

''the merger would create or strengthen a share of 25 per cent. or more in any relevant market in the United Kingdom or a substantial part of the United Kingdom''.

Nigel Waterson (Conservative, Eastbourne)

This is a probing amendment, on a short but important point. The amendment would replace the supply of goods test with a market share test. We take the view that it is slightly illogical, to put it mildly, for the substantive test to be based on competition but for a test not based on competition considerations to be one of the criteria. The test based on the supply of goods or services of any description is not the same as a market share test, and should be replaced by one. We are simply trying to bring more logic to the legislation. I hope that the Government will reflect on that and perhaps see the wisdom of it.

Melanie Johnson (Labour, Welwyn Hatfield)

I simply do not agree with that change. The thresholds have to be simple and easy to determine quickly. The existing share of supply test has fulfilled that function well for years and we were not pressed to revise it on consultation. My view is that if something is not broken, do not fix it. Market share would be a more difficult test and would lead to undue debate at the initial stage of the merger process. The purpose of the test is to take out of the scope of merger control a large number of transactions that are of no economic concern and to give business regulatory certainty that they will not fall within merger control. The share of supply is a more workable test for those purposes.

We also envisage extra resource burdens for both the OFT and business. It would take longer to calculate a more complex economic market share test. At the same time, business would feel the need to access more economic guidance, and the result could be to encourage more notifications on a prudential basis, increasing the administrative burden on the OFT. The definition in the Bill is simpler, more flexible and the right test in the context. Therefore, I hope that I have persuaded the hon. Gentleman to withdraw the amendment.

Nigel Waterson (Conservative, Eastbourne)

I said that it was a probing amendment and it has served its purpose. The Under-Secretary's explanation was sensible and helpful, even if she seems to take amendments personally at times. We can see the logic behind her explanation and, therefore, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mark Field (Conservative, Cities of London and Westminster)

I beg to move amendment No. 216, in page 13, line 6, at end add—

'(10) Notwithstanding the above, a relevant merger situation shall not be deemed to have arisen for the purposes of this Part if the transaction in question has no effects (either actual or potential) in the United Kingdom or any part of it.'.

Again, this is a probing amendment. I appreciate that a share of supply test will not be brought to bear. However, the turnover test remains at a fairly high level—£45 million. To prevent an excessive regulatory burden on UK businesses, we want to ensure that the OFT does not have the opportunity to spend the time and valuable resources of businesses reviewing mergers that have no impact in the UK. As the Minister pointed out, the asset test of £70 million and the turnover test of £45 million apply to world-wide

turnover. Therefore, in some cases—admittedly, it may be a relatively small number—there may be no impact whatever in the UK and we are keen to ensure that the companies involved would not find themselves falling foul of an immediate and automatic OFT inquiry. We propose that such transactions would not need to be notified in the same way.

Melanie Johnson (Labour, Welwyn Hatfield)

The amendment would make it clear that a relevant merger situation would not include mergers that have no impact on the UK or a part of it. In a sense, I agree with the hon. Gentleman, but I do not think that the amendment is necessary as the new merger regime is already clearly centred on mergers that relate to activity in the UK.

The share of supply threshold stipulates that the supply must be in the UK market or a substantial part of it, so it is UK centred. The turnover test measures the turnover of the target company in the UK. I emphasise the words ''in the UK,'' because they meet the hon. Gentleman's point. The Government have no desire for the competition authorities to investigate mergers that are not directly relevant to UK markets or activities and our merger regime reflects that. We propose to concentrate more on making that clear. I hope that I have persuaded the hon. Gentleman to withdraw the amendment. If not, I regret that I shall ask the Committee to oppose it.

Mark Field (Conservative, Cities of London and Westminster)

I thank the Under-Secretary for that explanation. In part, one of the purposes of the amendment was to clarify the situation. I hope that it has been clarified for those companies that would otherwise fall foul of the turnover test for an OFT inquiry. Therefore, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 21 ordered to stand part of the Bill.

Clause 22 ordered to stand part of the Bill.

Clause 23 - Extension of time-limits

Jonathan Djanogly (Conservative, Huntingdon)

I am interested to know how the Government arrived at the period of 20 days for an extension under clause 23(1).

Melanie Johnson (Labour, Welwyn Hatfield)

In response to requests from business, we proposed that the parties involved and the OFT should be able to agree an extension of the deadline for reference by up to 20 working days. We are also looking at other aspects of the timetable, as the hon. Member for Huntingdon is aware, and there is provision for further extension for cases that might be dealt with by the European Commission.

Question put and agreed to.

Clause 23 ordered to stand part of the Bill.

Derek Conway (Conservative, Old Bexley and Sidcup)

Before we canter through any more clauses, I must mention that when we come to the raft of amendments that have been debated, Government amendments will be put formally, but I do not intend

to call other amendments for a Division unless the hon. Members in whose name they were tabled have indicated to the Clerk that they want a Division.

Clauses 24 and 25 ordered to stand part of the Bill.

Clause 26 - Turnover test

Nigel Waterson (Conservative, Eastbourne)

I rise briefly to make a point about clauses 26 and clause 30 and I may make the same point later on clause 50 in the context of draft regulations. In some of the Under-Secretary's more helpful correspondence, she explained where we are in terms of the regulations, guidance and so on. On clauses 26 and 30, will she be a little more specific about the position with draft regulations? The Bill is hefty in anyone's money and many clauses will require further regulation or guidance in due course. It would be helpful to have that information because issues may arise from those regulations in due course, especially under clause 26.

Melanie Johnson (Labour, Welwyn Hatfield)

I am not sure that I can help the hon. Gentleman further. I set out in my letter on necessary consultation as regards several aspects of the Bill the exact position that we expect to arise—that is, where guidance or consultation will take place and what we envisage will happen next within the time frame. I am not sure that I can be more helpful to the hon. Gentleman. Can he explain what further information he is interested in?

Nigel Waterson (Conservative, Eastbourne)

It is difficult to know how to answer that question without knowing what is in the draft regulations. When we have seen them, we shall know what important matters are included and, perhaps more importantly, what important matters have been left out. I appreciate that this is a moving target and I do not want to put the Under-Secretary on the spot. However, I am trying to be helpful, even if it does not sound like it, and my argument is relevant to a number of the provisions that we are cantering through. It would be sad if draft regulations that were almost available, albeit it in early draft, and could be made available for our debates did not become available until the Committee had moved on. However, I appreciate that the Under-Secretary cannot produce great rafts of regulations if they are not ready.

Melanie Johnson (Labour, Welwyn Hatfield)

Things are being done in stages, as the hon. Gentleman appreciates, and some are more advanced than others. I have suggested the information that we hope to share with the Committee in more detail before Report. It will be possible to produce the information for some aspects of the Bill, but not all. We intend to produce draft regulations in good time before commencement and, obviously, all the regulations will go through the normal consultation period and time frames that the hon. Gentleman expects and which are the normal practice for the Government today.

Question put and agreed to.

Clause 26 ordered to stand part of the Bill.

Clause 27 ordered to stand part of the Bill.

Clause 28 - Relevant customer benefits

Nigel Waterson (Conservative, Eastbourne)

Again, I will be brief. The provision on ''relevant customer benefits'' is valuable and, contrary to what I said a moment ago about another issue, it is helpful that the clause sets out those benefits in detail. However, I want to draw the Under-Secretary out a little more in terms of the sort of investigation that she envisages under the clause and the practical considerations.

There are two groups of benefit, the first of which is fairly obvious:

''lower prices, higher quality or greater choice of goods or services''

in subsection (1)(a)(i). One is tempted to take the view that most mergers would involve less choice rather than more, so it would be interesting to hear more about the reasoning behind that sub-paragraph.

To return to some points made by my hon. Friend the Member for Huntingdon during a previous debate on dentistry—it seems aeons ago and I am glad that we have not heard much about it recently—I am pleased that the Under-Secretary is not taking the same route that one or two consumer organisations misguidedly took by expecting prices to be the same for the same services. I hope that she is, by definition, in the clause accepting that prices may vary enormously for the same goods or services.

I want to draw the Under-Secretary out further on subsection (1)(a)(ii) which refers to ''greater innovation''. I presume that that means greater technological innovation in the delivery of services—for example, by internet and so on—and in the sort of product available. It would be helpful to have a sketch of the sort of innovation that she envisages, bearing in mind that the provision applies to ''future customers'', according to the last line of the clause, as much as to current customers, and how the judgment will be made so that the relevant customer benefits exception comes into force.

Mark Field (Conservative, Cities of London and Westminster)

Without wishing to introduce too many references to dentistry, I also want to get my teeth into something and ask the Under-Secretary to do likewise. The underlying purpose of the Bill is to encourage certainty, consistency and predictability. How does she balance customer benefits, about which the clause goes into admirable detail, with substantial lessening of competition, to which the key clause 20 refers? How can the uncertainty that will be brought about possibly be in keeping with the raison d'être of the Bill?

Ken Purchase (Labour/Co-operative, Wolverhampton North East)

I am worried that we seem to be writing get-out clauses. I draw the attention of my hon. Friend the Under-Secretary to subsection 1(a)(i) and ask in a friendly but probing way, ''Lower prices, for how long? Higher quality, what if it falls?'' Those questions can be addressed, but I am worried that the provision may provide the opportunity to continue with a merger when, in truth, consumers will benefit not at all.

I also draw to my hon. Friend's attention subsection (2)(a), which refers to ''a reasonable period'', whatever that might mean in terms of the process of a merger. Will she deal with timing and say whether those escape clauses do a disservice to consumers when the onus should be on the merging companies to prove that they will bring positive benefits?

Melanie Johnson (Labour, Welwyn Hatfield)

Two situations might be relevant and could affect the decision of the competition authorities in relation to consumer benefits. In the first situation, one of the circumstances in which the OFT might decide not to refer is where it expects customer benefits to outweigh the competition concerns. The second situation relates to a reference. If a merger is referred, the Competition Commission has the task of deciding whether a merger will result in a substantial lessening of competition. The Competition Commission can have regard to customer benefits and will have discretion to apply lesser competition remedies than would otherwise be the case in that second scenario. The discretion would extend from the Competition Commission clearing the merger without applying any competition remedies, if it decided that nothing could be done about competition problems without eliminating the relevant customer benefit, to taking those remedies into consideration.

The challenge in identifying the framework, as the hon. Member for Cities of London and Westminster (Mr. Field) remarked in his contribution, was to identify a framework that would allow such benefits to be taken into account without undermining the central importance of the competition analysis. That is certainly true and we believe that we have such a structure. At stage one, the OFT can choose not to refer a merger where it believes that the customer benefits outweigh the competition concerns, but to reach such a belief, we expect that the benefits will have to be significant and certain. To some degree that deals with the question of my hon. Friend the Member for Wolverhampton, North-East (Mr. Purchase), but not entirely. I accept that the certainty is important, as it covers time as well as existence.

Where there are doubts, a reference would always be made so that the issues could be studied in depth. At stage two, the Competition Commission will always have to reach a decision on the substantial lessening of competition test. It will have to take into account customer benefits at the relevant stage of setting remedies.

The hon. Member for Eastbourne asked for examples. I have quite a few. I will not detain the Committee long in giving them; I will just run through a couple. For example, a network benefit in mobile telecommunications is that the more users who join a particular mobile network, the more valuable the network becomes to those users—they can contact more people, in more locations, at lower cost as the network increases in size. In the case of large economies of scale, where the effect of scale economies on prices is sufficient to outweigh that of a substantial lessening of competition, such circumstances could lead to an overall reduction in prices—provided that the authorities were satisfied

that the economies of scale would be realised in spite of a significant reduction in competition and prices after the merger would remain lower than they were pre-merger.

My hon. Friend the Member for Wolverhampton, North-East made a point about ''reasonable time''. That can be interpreted by lawyers, who will decide whether the OFT or the Competition Commission are doing things properly. My third example is that of a merger producing more innovation through research and development benefits. The hon. Member for Eastbourne mentioned that in his remarks. Investment in research and development often involves large fixed costs and there may be circumstances where critical mass is needed—in terms of research expertise or capital or both. Under those circumstances, that can be secured only through a merger, although substantial benefits may be gained from that.

Nigel Waterson (Conservative, Eastbourne)

My request for some examples has been vindicated. The Minister has been very helpful and it is easier to grapple with specific examples. On the innovation point, let us assume that two pharmaceutical companies want to merge. There will often be a critical mass argument to have the research and development focused on a new product or a combination of two existing products, but at what point is the balance struck between the domination—we do not have a dominance test, sadly—of the market by the new company and its one very successful product? Again, that is a difficult example to conjure with, but it is important that we understand the way in which the Under-Secretary's mind works. How strong will the innovation argument within this exception clause be in such a context?

Melanie Johnson (Labour, Welwyn Hatfield)

That will depend on the circumstance of the case. That balance should not be disregarded; it must be weighed up when considering substantial lessening of competition. The circumstances described are ones in which that issue will have to be examined, but it will vary from situation to situation. That is shown in the examples that I gave and we could construct many examples, under each main heading.

The competition authorities will have to examine that balance as they go through each case. They will also have to examine the economic significance of customer benefits and the competition issues that arise. The core of our response is to ensure that we get the balance right. Competition can be balanced in the context given, but only in the way that we have set out in the Bill.

Question put and agreed to.

Clause 28 ordered to stand part of the Bill.

Clause 29 - Information powers in

Jonathan Djanogly (Conservative, Huntingdon)

This clause deals with the provision of information on a proposed investigation relating to a completed merger. The clause is worded as one would expect. However, in previous debates, such as those on the new cartel and criminalisation provisions, my hon. Friends and I and others commenting on the Bill, in particular the Confederation of British Industry, have consistently raised fears about the fact that the nature of the OFT will change. Instead of being just an investigator, it will now be an investigator and prosecutor. As a result, companies, in general, may be less willing to supply information about themselves and their markets.

Of course, this clause states that companies have to provide information, but the Minister will surely appreciate that in the normal course of the OFT's running, the effective provision of information in investigations to a large extent works on the basis of mutual respect between business and the OFT and on everyone's desire to deal with the situation as swiftly as possible, usually so that the deal in hand can be done. The clause may make that process more formal and legalistic, which might increase costs and slow down the process. What comfort can the Minister give to business that, with all the extra sticks in the Bill, companies will not feel threatened, or be inhibited in the way that I have described, in the provision of information as envisaged by the clause?

Melanie Johnson (Labour, Welwyn Hatfield)

Our reasoning is that we want mergers to be dealt with as efficiently as possible. There is always a danger that parties may face a reference if the OFT does not have enough information. We want to ensure that there is enough information so that that does not happen unnecessarily. The OFT must be able to make an informed decision, so it needs to get information easily and quickly. If the parties need some time to compile information, they may benefit from an extension of the deadline for reference. That is catered for.

We expect the new power to make the regime operate much more effectively. Pre-reference, we expect that the threat and risk of the delay or reference that people will otherwise face will be adequate to ensure that the companies provide the information. Where companies refuse to co-operate and a merger is referred, obviously, the stage two information powers carry tougher penalties. However, there is no statutory limit for the reference decision on anticipated mergers, and the absence of a statutory time limit means that formal investigative provisions are not required. We believe that that is the right balance. We do not want unnecessary reference, but we want information to be supplied. A tougher provision relates purely to the post-reference situation and we believe that the consequences of not supplying information will meet the needs of the competition authorities as well as business to deal with matters swiftly and efficiently.

Question put and agreed to.

Clause 29 ordered to stand part of the Bill.

Clause 30 ordered to stand part of the Bill.

Clause 31 - Duty to make references in

Nigel Waterson (Conservative, Eastbourne)

May I have your guidance, Mr. Conway? Amendment No. 177, which I am sure is totally estimable and will make the world a thoroughly better place, does not seem to feature in the selection list. Did we deal with it earlier?

Derek Conway (Conservative, Old Bexley and Sidcup)

Perhaps I might help the hon. Member, in case he gets in deep water. The matter has previously been debated. Obviously, the Committee has covered a lot of ground, and memory fails us all from time to time.

Ken Purchase (Labour/Co-operative, Wolverhampton North East)

On a point of order, Mr. Conway. I was also somewhat stunned by the procedure but recalled your earlier words. I wonder whether you would help the Committee by mentioning that an amendment has been previously debated but the question on it not put. That would be enormously helpful and save a scramble through the papers.

Derek Conway (Conservative, Old Bexley and Sidcup)

That is certainly possible. As I mentioned earlier, if an hon. Member indicates a wish to divide the Committee on amendments that have been previously debated, I will put the question formally. Government amendment No. 177 was previously debated, but the Under-Secretary must formally move Government amendments. That is part of our quirky, wonderful procedure.

Clause 31, as amended, ordered to stand part of the Bill.

Clauses 32 to 35 ordered to stand part of the Bill.

Clause 36 - Investigations and reports on

Jonathan Djanogly (Conservative, Huntingdon)

I beg to move amendment No. 229, in page 22, line 38, at end insert—

'(2A) In making or preparing any report under this section, the Commission shall not disclose any information of a confidential nature.'.

It must be appreciated that in a merger situation, particularly a non-contested one, in which both parties feel that the enlarged group would be of real benefit to them, the question of competition clearance—the possibility of a referral—would be the main risk factor that could delay and add a lot of additional costs to the transaction. I am certainly not saying that the requirement is wrong. However, if the companies' advisers were to tell them that there was a risk of referral, they may be put off the deal, because of the possibility not just that money will be wasted but that confidential information might enter the public arena, perhaps unnecessarily. Such non-public information would then be available to the companies' competitors. In the worst case, that could hinder the transaction or even put it off altogether, although the

merged companies may be much better together than standing alone. It is vital that information released by the Competition Commission in its report, or indeed elsewhere, should not include information that could be damaging.

Melanie Johnson (Labour, Welwyn Hatfield)

I agree with the hon. Gentleman about the importance of adequately protecting confidential information, and we have tried to achieve that throughout the Bill. A blanket ban on disclosing information, however, is not appropriate. A balance needs to be struck between protecting confidential information and ensuring that an adequate explanation is given, which is an assessment that needs to be made case by case.

The amendment would remove the Competition Commission's ability to find the right result when publishing its reports on references. Businesses have told us that it is important for the new regime to operate transparently, which it will. For example, we expect the Competition Commission to produce provisional findings part of the way through its inquiries, the Bill provides for authorities to consult parties on proposed decisions and we are introducing duties to give reasons for decisions. Those measures add up operational transparency, which will be good for business.

However, greater transparency means that more information will be made available. Occasionally, information that one party would argue was confidential would be an essential part of the reasoning in a case of which another party would need to be made aware, which, to a degree, is a problem now. We have therefore proposed a test for the disclosure of information that would apply to all merger information. Clause 235 sets out a test that will ensure that the authorities have regard to all of those issues.

I hope that I have reassured the hon. Gentleman that in many ways we are with him on the matter and are seeking to strike the right balance.

Jonathan Djanogly (Conservative, Huntingdon)

The Under-Secretary makes the fair point that the amendment is, in effect, a sweeper that does not look at particular circumstances. Given that I want to come back to the general issue under later clauses, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 36 ordered to stand part of the Bill.

Clause 37 - Time-limits for investigations and reports

Nigel Waterson (Conservative, Eastbourne)

I beg to move amendment No. 230, in page 23, line 14, at end insert—

'such extension of time only to be granted with the consent of the parties.'.

Derek Conway (Conservative, Old Bexley and Sidcup)

With that we may discuss amendment No. 255, in clause 49, page 34, line 27, at end insert—

'such extension of time only to be granted with the consent of the parties'.

Nigel Waterson (Conservative, Eastbourne)

As members of the Committee will appreciate, clause 37 introduces a fixed time limit of 24

weeks for the Competition Commission to prepare and publish its report on a merger reference. Subsection (3) allows it to extend that timetable by up to eight additional weeks.

The CBI has expressed its concern that any such extension should take place only with the consent of both parties to a merger. The Competition Commission may not be able to reach an agreement on an extension with both parties to a merger. One can envisage a hostile bid going ahead, and an agreement not being allowed because of the damaging effect of a protracted investigation on the potential victim company. If one of the parties were not prepared to agree, the period for the second stage investigation should remain at the maximum stipulated in clause 37 of 24 weeks.

This is perhaps presumptuous, but it might the assist the Under-Secretary in giving her answer to the Committee if she were to deal with where the 24-week figure came from in the first place, because I am sure that there is an internal logic to it. An even greater onus will be placed on those who want to create the situation in subsection (3), whereby one or both parties can be forced against their wishes to extend that period.

The CBI should also like to pass on that it would have preferred the adoption of the maximum 16-working-week time limit, which would mirror the European Commission merger regulation phase two timetable. To stray slightly outside the terms of the amendments, which might obviate the need for a stand part debate, it would be helpful if the Under-Secretary, in describing the logic behind the 24-week provision, could tell us why the 16-week time limit was discarded at an early stage, when it would otherwise have neatly mirrored the ECMR timetable. That is the reason for the amendments. The subsection is clearly causing concern in the business community, so I shall be interested to hear its justification.

Melanie Johnson (Labour, Welwyn Hatfield)

First, I shall deal with the hon. Gentleman's points on the 24-week period, although I think that the amendment principally relates to the eight-week extension. We consulted on options that related to several issues—such as time, transparency and thoroughness—and they all had trade-offs. The hon. Gentleman will be aware from his familiarity with the Fair Trading Act 1973 that it states 26 weeks; the Bill reduces the period slightly. We did not feel it appropriate to use the ECMR figure having considered the practicalities.

The period is extendable by up to a further eight weeks if the Competition Commission thinks that there are special reasons for extension. I understand to some degree the sentiment that underlies the amendments because, in general, it is right that parties have certainty about the timetables that apply to a merger. However, the Competition Commission should have discretion over when to make an extension for special reasons. One reason for which an extension might be required is illness of members of the reporting groups which might seriously impede the Competition Commission's work. Reasonable parties

would probably consult on an extension in such circumstances, but that cannot be relied on, so it seems unwise to give the parties the final say over and above the Competition Commission.

I reassure the hon. Gentleman that the Competition Commission's decision to extend the timetable is not supposed to be an easy option. It must consider that there are special reasons why the 24-week period should be extended. Clause 103(4) requires it to publish its reasons for any such extension, and only one such extension is possible. For example, it cannot opt for a four-week extension and then decide that a further four weeks are needed.

The clause is intended to impose a discipline on the Competition Commission that is strong enough to ensure that the vast majority of cases are completed within the 24-week deadline. The flexibility of the Fair Trading Act regime means that the Secretary of State is currently able to grant an extension of up to three months for special reasons. Hon. Members will see that we have been much more rigorous in our approach.

I take comfort from the fact that the remarks of the CBI in response to the July competition White Paper suggest that it thinks that the approach that we have adopted is right. In response to the proposal that the Competition Commission should have a power to extend the maximum timetable by eight weeks in exceptional circumstances, the CBI said:

''We need to appreciate the need for this, and also welcome the need for published reasons to be given for the extension.''

In light of my explanation, I hope that the hon. Gentleman withdraws his amendment.

Vincent Cable (Liberal Democrat, Twickenham)

Why did the Under-Secretary reject the European Union precedent? She said that the Department had considered and rejected it, but it is not entirely clear why. At first sight, cross-border merger and its implications in the European Union appear to present more complex problems and, in general, would mean dealing with larger mergers. It is not clear why that can be dealt with sooner. Many people would argue that the European Commission is not the world's most efficient institution. Why is it able to deal with such matters so much more quickly?

Melanie Johnson (Labour, Welwyn Hatfield)

I agree with the hon. Gentleman in some regards. Under ECMR procedures, one single body carries out both stages. When the process reaches its second stage, it is already fully up to speed, so is more likely to hit the deck running than our two-stage UK process, where the OFT handles the first stage and the Competition Commission carries out the in-depth investigation. The measure gives the Competition Commission the opportunity to be a fresh pair of eyes—a feature strongly supported by business. We therefore felt that the four-month maximum timetable under the ECMR arrangements was not appropriate; we felt comfortable cutting back from the FTA timetable.

Nigel Waterson (Conservative, Eastbourne)

I have expressed the concerns that the CBI expressed and heard the Minister's comments.

I cannot take the matter further at this stage, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 37 ordered to stand part of the Bill.

Clause 38 - Section 37: supplementary

Jonathan Djanogly (Conservative, Huntingdon)

This clause deals with the release and use of information relating to the preparation of the reports. We have discussed how the reports should be prepared and published and, under clause 36, I mentioned my concerns about the damaging effect of the release of confidential information through that process.

In her reply, the Under-Secretary mentioned that the OFT and the Competition Commission should be answerable to their decisions—hence the reports. I fully support that and have no problem with it but, under the Bill as it stands, it will simply be possible to release the information, and the damage will then be done. There is no way of speaking formally to the company before the release of the information so that it has a chance to object to the disclosure of particular parts which might damage its business. Why can a company not have the right to receive a copy of the full report before it is released to the public?

The Competition Commission would, of course, make its findings public in summary form, without the company having the chance to look at it in advance, which is quite right and proper. However, between the release of the preliminary findings and that of the full report, why should the company not be given a few days to review the full report, to ensure that the information in it will not damage its business? It should at least have the chance to discuss with the Competition Commission the damaging effect of any such information, with a regard to limiting that damage.

Melanie Johnson (Labour, Welwyn Hatfield)

The balance is difficult to strike, but we think that we have found the right balance in all the measures covered in this clause and the earlier clauses relating to it. The 1973 Act is relevant to this clause, but companies will be required to undertake review by the Competition Commission. They will have to put forward their comments, which will be provisional findings, not conclusions. I trust that I have reassured the hon. Gentleman that we have the balance right.

Question put and agreed to.

Clause 38 ordered to stand part of the Bill.

Clause 39 ordered to stand part of the Bill.

Clause 40 - Intervention by Secretary of State

Nigel Waterson (Conservative, Eastbourne)

I beg to move amendment No. 66, in page 26, line 7, leave out from ''56'' to end of line 8.

The amendment is quite important and it raises two issues. One is of principle and the other of uncertainty.

The amendment was raised by the joint committee of the Law Society and the Bar, which was examining the legislation, and it raises wider concerns. As one can tell at a glance, subsection (3) refers to a ''public interest consideration''. Our next major debate—with your acquiescence, Mr. Conway—will be under clause 56, which is a convenient place to tackle the issues of principle relating to public interest.

The narrow point is in the words following ''section 56'' in subsection (3):

''or is not so specified but, in the opinion of the Secretary of State, ought to be so specified.''

As a matter of principle, we think that it is quite wrong to pass primary legislation that leaves a door wide open for the Secretary of State, should he experience esprit de l'escalier later, to think of some other basis to intervene. If such a door is left even ajar, it would make nonsensical the care that we lavish on Bills in these Committees. In this case, one could drive the proverbial coach and horses through it, if one were so minded.

It is wrong in principle to say that the Secretary of State should have the power to consider public interest considerations that are not listed in the legislation. Given the care and work that has been directed at drafting the Bill, and the extra care that must be attached to anything that has the phrase ''public interest'' in it, I would be surprised if the draftsmen had not already thought of other possible situations that could have been included. However, as it stands, the Secretary of State will be able to add a new public interest consideration, and will be able to do so in response to a specific or proposed merger, which brings me to my second area of concern.

In essence, a merger could be referred on new grounds that did not exist when the merger was conceived. That is the point about uncertainty. Companies in all good faith will start negotiations to merge their companies and spend a lot of time and money doing so without being sure that the goalposts will not be moved at some subsequent date by the Secretary of State. In other words, they could agree to merge on the basis of the provisions in the clause but, after expending a great deal of time, money and effort, discover that the Secretary of State has said that there will be an intervention on public interest grounds on the basis of something not set out in legislation.

I do not want to be repetitive, so I will not get into the definitions of public interest involved—we will come to that under clause 56. We think that the power is a dangerous one to give any Secretary of State, and that such uncertainty is bound to cause problems in the business community. The Under-Secretary has said more than once, in a number of different contexts and quite justifiably, that we need certainty in the way that the provisions are applied. The clause leaves an enormous lacuna in the legislation that can be filled at any time by any Secretary of State, possibly part of the way through a merger. We feel strongly about the provision, and for us to be satisfied, the Under-Secretary is going to need a pretty good justification for it.

Andrew Lansley (Conservative, South Cambridgeshire)

I want to support my hon. Friend the Member for Eastbourne. The amendment will help us to establish the Government's intentions and explain how clause 40 is intended to work. It may be helpful if I explain why there might be a problem with clause 40(3). To explain the amendment, I must refer ahead to clause 56, on which I will not dwell because we will come to it later.

National security interests are specified in clause 56. It is clearly intended that the Secretary of State will be able to add to such a consideration, which might give rise to an intervention notice. That would, however, have to be done by order. In doing so, the Secretary of State would not be confined to cases that were about to be considered by the OFT or the Competition Commission. Cases that were already under consideration could be looked into. There is no sense in which the absence of such a consideration already being specified by order under clause 56 would mean that the Secretary of State could not act when presented with a merger situation if he or she felt that a public interest, which had not previously been considered and that we had not put in the legislation, were brought to bear.

As we will discuss later under clause 51, the Secretary of State will be able to wait for up to 24 weeks before finalising a consideration. In that context, finalising means making the order necessary to amend clause 56. That is a problem because if there were a relevant merger situation and the Secretary of State held the opinion under clause 40(3) that a consideration ought to be specified under clause 56, he or she would have 24 weeks in which to decide whether to make an order, which, as we have previously heard, happens to be exactly the same 24 weeks during which the Competition Commission would consider the case under the time limit.

The Secretary of State would have the luxury of having an opinion on whether a consideration ought to be in clause 56. The OFT and the Competition Commission would consider it under an intervention notice all the way through the reference, but at the end of the day the Secretary of State would not have to make the order, in which case that consideration would fall away and the reference would not be made.

The Secretary of State would be able to have his cake and eat it. He would be able to have an opinion about whether a consideration ought to be made under section 56, he could have it tested by reference to the Competition Commission and could get virtually to the last day and it would still be considering it. He could then pull everything away at the last minute and it would never have to go before Parliament.

I dwell on all those matters because if the amendment moved by my hon. Friend the Member for Eastbourne were agreed, the Secretary of State could still intervene. Clause 56, as amended, could be used. The difference is that the Secretary of State would have to bring an order before Parliament and get it to agree that such a consideration ought to be added to the exceptional considerations of national security that were foreshadowed in the legislation.

On the face of it, there would be ample time in which to do that because 28 days is sufficient time to make and lay an order. There would be no bar under clause 56 for that to relate to considerations for cases that had already occurred. People would not be able to run through a merger situation and secure consent without the Secretary of State having an opportunity to make an intervention notice, because he could amend clause 56 to do it. The legislation is designed not to allow the Secretary of State in wholly exception circumstances to issue an intervention notice with the scrutiny of Parliament but to allow the Secretary of State to make an intervention notice and test the issue virtually to completion without the intervention of Parliament.

We could deal with that by following the amendment of my hon. Friend the Member for Eastbourne and getting rid of the part of the clause that allows for the opinion of the Secretary of State, or we could change the time limits in clause 51 so that the Secretary of State must finalise the consideration at an earlier point. I shall not dwell on clause 51. We can quickly refer to it later, if necessary. However, a way of dealing with the issue would be for the Secretary of State not to take the power in clause 40, which allows an opinion about an intervention notice, but to use the proper procedure under clause 56.

Jonathan Djanogly (Conservative, Huntingdon)

One of the most significant purposes of the review of competition law is to remove political interference. I do not think that anyone in the Room would dispute that. On the one hand the public interest test has been removed—extremely curtailed, at least—but on the other, the Secretary of State has a get-out if, in his opinion, something should count as public interest. There is an inconsistency of approach.

When we debated clause 20 at some length, Opposition Members argued that the OFT should have discretion on making referrals. At that time, the Government attacked the suggestion on the basis of a variety of arguments but mainly the concept of uncertainty coming into the legislation and the need for businesses to be able to have certainty. Yet here the tables have been turned, this time in favour of discretion for the Secretary of State. The Government seem to be arguing that the Secretary of State should have discretion to decide when the measure should apply. I would be grateful if the Under-Secretary would justify the inconsistency of approach.

Mark Field (Conservative, Cities of London and Westminster)

I entirely agree with the comments of my hon. Friends the Members for Huntingdon and for South-East Cambridgeshire—

Andrew Lansley (Conservative, South Cambridgeshire)

South.

Mark Field (Conservative, Cities of London and Westminster)

I apologise to my hon. Friend the Member for South Cambridgeshire (Mr. Lansley). Clearly, I do not know the geography of Cambridgeshire as well as that of the centre of London. Perhaps I may be forgiven for that.

We had a long discussion on clause 20 and I openly said that I was uneasy about the idea of taking politics out, not least for the reasons given by my hon. Friend

the Member for South Cambridgeshire in relation to those who are not deemed fit to run companies and how the powers to make the sort of inquiry that we had in mind might be taken away from the Secretary of State.

Clause 56 is entirely clear about the ground of national security. Clause 40 tries to undermine or drive a coach and horses through the issue of national security by virtually giving carte blanche to any Minister, notwithstanding national security considerations—I believe that such considerations are entirely acceptable to everyone—effectively, to play to the gallery. In recent years, Ministers have played to the gallery on competition matters in several cases. For example, the rip-off Britain campaign that was run by the then Secretary of State for Trade and Industry in the late 1990s was a deliberate attempt to get at the supermarket chains.

We are concerned that playing to the gallery will undermine the predictability and certainty tests that have been heralded to such a great extent. Subsection (3) gives carte blanche for any Secretary of State to undermine the very ideas of competition and certainty that the Enterprise Bill should be putting in place. I shall be interested to have the Under-Secretary's guidance as to how the clause will operate. Under what circumstances will Ministers invoke their powers and go one step further than what is envisaged in clause 56?

Melanie Johnson (Labour, Welwyn Hatfield)

Let me be clear: we have no plans to specify new public interest considerations. Merger reform has been the subject of extensive consultation and we have considered thoroughly whether anything beyond national security should be in the Bill. We do not expect to specify further issues in relation to the current scope of the merger control regime.

It would be unwise, however, to ensure that unforeseen circumstances could not be dealt with if there were a compelling case in the public interest. We must ensure that we can meet unforeseen circumstances and other legislation makes similar provision. The European merger control arrangements are focused on competition, but provide that member states can take appropriate measures to protect other legitimate interests. Consideration of whether new issues raised by member states are legitimate interests takes places in parallel with consideration of the case. That is a sensible arrangement and it ensures that a case is not needlessly delayed.

The amendment could stop the Secretary of State claiming an interest where a case raises important issues but the deadline for a reference decision is close. I have already explained why it is sensible to have limited flexibility, but I reassure the Committee that wherever an intervention notice cites a new public interest consideration, subsection (7) will ensure that the Secretary of State must move quickly to make an order specifying that consideration. The subsection states that it must be finalised ''as soon as practicable''—[Interruption.] The hon. Member for South Cambridgeshire is laughing, but it is only sensible to include such a provision.

The Bill also ensures that public interest considerations can be taken into account in making a final decision on a case only if they have been finalised by Parliament. Our proposals ensure that the Secretary of State can intervene to claim an interest in a case, but cannot determine its outcome with regard to any public interest consideration that has not been approved by Parliament. That represents the right balance: we need to ensure that the legislation can deal with unforeseen matters, and provide appropriate safeguards for the use of the Secretary of State's powers, but I emphasise that we have no proposals to use that. We are simply ensuring that if the unforeseen arises, we have some contingencies.

On Government intervention, ministerial involvement will be the exception. The Secretary of State will take decisions only where the case raises certain matters specified by parliamentary agreement. The Secretary of State must serve the intervention notice before the public interest test can be applied. If no intervention notice is served, the case follows the competition-only route.

Of course, companies need certainty. When a case raises wider public interest issues, the Secretary of State needs to claim interest transparently and within a clear deadline. The intervention notice will have to be published and will make it clear that the case is to be decided by the Secretary of State in terms of the public interest test. The Secretary of State will have to give reasons for the intervention. It is important that companies know that non-competition issues must be raised in advance of any possible reference decision.

The Secretary of State will be limited in the matters on which he or she can intervene. They must already have been specified in legislation, or be ones that the Secretary of State thinks should be so specified. There are no plans to extend that beyond national security.

Andrew Lansley (Conservative, South Cambridgeshire)

I have indeed seen subsection (7). Given that the Secretary of State will have to set out the grounds for the intervention notice at the time at which it is made, can the Under-Secretary give any reason why an order under clause 56 should not be made within 12 weeks, for example, rather than the 24 that seem to be allowed?

Melanie Johnson (Labour, Welwyn Hatfield)

When the Secretary of State wishes to intervene on those grounds she will be compelled to bring forward an order and to specify that in legislation. The 24-week period is a long-stop and fits in with a possible time scale for obtaining approval for a new public interest consideration. It was chosen for the order to be laid twice to allow for consultation and discussion, as well as long summer breaks and parliamentary timetables during such breaks. If the consideration is not approved within the deadline, the issue will be disregarded in any case. I assure the hon. Gentleman that we want to ensure that cases are not unduly delayed.

Andrew Lansley (Conservative, South Cambridgeshire)

When making an order to amend under clause 56, clause 116(7) provides that periods

''during which Parliament is dissolved or prorogued or during which both Houses are adjourned for more than four days''

will not be counted. I fail to see why a recess should be a relevant consideration. If time is to be allowed for

orders to be made simply in a practical way, would it not be better to set an intermediate time limit of, for example, 12 weeks rather than allowing the Secretary of State 24 weeks during which the commission might be working?

Melanie Johnson (Labour, Welwyn Hatfield)

As I have said, the time scale is a long-stop. It is a maximum and will not necessarily operate. I appreciate the hon. Gentleman's interest in trying to peg it to a shorter time frame. We would all like that, but the fact is that the summer break involves not only the House, but other parties that may wish to comment. Members of this House may wish to have an input but they may be away on holiday. During the summer, it is difficult for people to contribute fully to discussions unless some of the time scale falls outside the summer period. That is why we chose the time scale. It was not plucked out of the air. It allows for the most extreme case when that length of time may be required. We need that flexibility to cope with the need to obtain parliamentary approval and to make final decisions.

Clause 56 does not affect the limitation that the Secretary of State must intervene before reference and I hope that that clarifies the interaction between the two clauses. I hope that I have persuaded Opposition Members to support the clause unamended because I believe that we have got the balance right.

Nigel Waterson (Conservative, Eastbourne)

I am sorry to disabuse the Under-Secretary, but she has not persuaded me. Two issues still worry me. One concerns the principle behind this part of the Bill: to eliminate ministerial involvement. I believe that it is common ground in the Committee—including the Under-Secretary—that any exception should be as narrow as possible. National security is, I hope, about as narrow as one can get. Rather like an elephant, it is difficult to describe but one knows it when one sees it. National security would hit any sensible Secretary of State firmly in the face as and when it arose. I am worried as a matter of principle about any attempt to extend what is being suggested, particularly in this vague way.

What the Under-Secretary said was supposed to reassure me, but it had the opposite effect. More worrying is the fact that, as she has repeated on several occasions, there are no plans whatever to specify any other ground and nothing foreseeable is being considered. That seems to be making the situation worse. If something sufficiently serious arose outwith the imagination of everyone involved with the Bill, including officials who have had a hand in drafting it over a long period, and was sufficiently serious and important, primary legislation could be passed through both Houses very quickly to deal with the matter, rather than going through the order-making procedure. It is very worrying that this might depend on the approach of the individual Secretary of State. We have been told that this Secretary of State cannot foresee any circumstances to be included, although I do not expect that she has spent much time worrying and thinking about it. National security is, apparently, all that we are worried about.

Melanie Johnson (Labour, Welwyn Hatfield)

I can reassure the hon. Gentleman that we have spent time thinking about the matter. After considering it very carefully, we can foresee no further situation that might be included.

Nigel Waterson (Conservative, Eastbourne)

I take that point; I am not trying to denigrate the amount of time that the Secretary of State has spent on the matter. From that point of view, it is reassuring that she and other Ministers, however much time they have spent on it, have not come up with the remotest possibility of any other heading to put in primary legislation. However, suppose a different Secretary of State were to take over during what remains of the life of this Government—someone with a much more interventionist approach, who wanted to intervene before breakfast, before lunch and before dinner, to coin a phrase. This would be a wonderful section through which they could do that, by coming up with a whole range of different grounds.

Lest the Under-Secretary should think that fanciful, let her look ahead to amendment No. 262, which we shall debate very shortly, under clause 56. It is a workmanlike attempt by some of her old Labour colleagues in the House to do just that—open up a great hole in the legislation through which such interventionist policy could be enforced.

There is a problem about certainty. If the Under-Secretary wanted to go halfway towards allaying the concerns of the business community, she might agree to go away and consider later amendments to exclude any changes affecting mergers or investigations of mergers already afoot. That would take a lot of steam out of the business community's concerns. We are not happy with the explanations. I am not saying for a moment that the Under-Secretary has not tried hard and been absolutely open about the thinking behind the provision. However, given the Department's current thinking, it is precisely the mystery of why on earth we need to leave that gap in the legislation that still causes me concern. We might wish to return to the subject later. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 40 ordered to stand part of the Bill

Clause 41 ordered to stand part of the Bill.

Clause 42 - Investigation and report by OFT

Clause 43 - Power of Secretary of State to

Andrew Lansley (Conservative, South Cambridgeshire)

I do not wish to detain the Committee, but I want to be sure that I understand the purpose of the clause accurately. I would be grateful for the Under-Secretary's confirmation, as the clause seems to be designed to allow the Secretary of State to refer a merger situation to the Competition Commission after having made an intervention notice, whether or not the OFT has determined that there is a substantial lessening of competition. Further, under clause 42, the OFT will have provided advice and recommendations in relation to a public interest consideration raised by the Secretary of State under the intervention notice. The implication in clause 43—although it is not set out in detail—is that the Secretary of State will be able to make a reference to the Competition Commission whether or not the OFT has decided that that public interest consideration is well founded and should give rise to a reference.

In effect, if I understand the provision accurately, the Secretary of State is proposing to be able to ignore the OFT. The Competition Commission will be able to make a determination and the Secretary of State cannot sustain an intervention notice unless it is approved by Parliament. That further heightens the fact that, having issued an intervention notice, the Secretary of State can cause the Competition Commission to undertake a reference—with all that that entails—even though the intervention notice has not been discussed by Parliament and even though the public interest raised by the intervention notice may have led the OFT to say both that there may be no case for a reference to the Competition Commission, and that there is no substantial lessening of competition. So, the Under-Secretary wants an all-embracing power. I should be happy to see that confirmed in terms.

Melanie Johnson (Labour, Welwyn Hatfield)

We have proposed that the Secretary of State should have the power to refer a case that qualifies for investigation if he or she believes that the merger may operate against the public interest. The result will be that the Secretary of State will refer cases requiring more in-depth consideration to the Competition Commission. The public interest test that the Secretary of State will apply under the new regime will be more limited than that in the Fair Trading Act. The Secretary of State will be limited to taking account of the relevant public interest considerations and any substantial lessening of competition.

The purpose of the clause is to provide discretion for the Secretary of State to refer mergers that might operate against the public interest. The Secretary of State will assess the public interest with regard to the competition issues and the relevant public interest considerations, and will view a substantial lessening of competition as operating against the public interest unless it is outweighed by the benefits of the public interest consideration. The Secretary of State has discretion to refer because that is appropriate. However, he or she must give the reasons for the decision on reference. The OFT has a duty to refer, as it is important to define the role of the relevant body.

To answer the hon. Gentleman's question, the Secretary of State can refer on public interest grounds

where the OFT has said that there are no competition concerns. However, wider issues such as national security must be considered.

Andrew Lansley (Conservative, South Cambridgeshire)

The Under-Secretary has helpfully answered limb No. 1 of my question. However, I was essentially putting to her a hypothetical situation: the OFT has said that there are no competition grounds for reference and, given advice under clause 42(6), public interest grounds do not merit a reference. Is she saying that she wants the Secretary of State to have the discretion to make a reference where there are no competition grounds and the OFT advises that there are no public interest grounds either?

Melanie Johnson (Labour, Welwyn Hatfield)

I believe that the answer to that is yes. The OFT has competition expertise and it is right that the Secretary of State, whose view on a public interest test is important, should be determinative in such cases. I hope that I have clarified the point for the hon. Gentleman.

Question put and agreed to.

Clause 43 ordered to stand part of the Bill.

Clause 44 - References under section 43: supplementary

Melanie Johnson (Labour, Welwyn Hatfield)

I beg to move amendment No. 263, in page 30, line 33, leave out ''that section'' and insert ''section 43''.

I commend the amendment to the Committee. It seeks to clarify that the Competition Commission will consider relevant customer benefits only where it has identified a substantial lessening of competition. The purpose of taking account of relevant customer benefits is to ensure that the authorities have regard to them in light of the detriment created by any substantial lessening of competition. Where there is no such lessening, the case will be decided on the relevant public interest considerations only.

I am sorry, Mr. Conway. I have just spoken to amendment No. 180 instead of amendment No. 263, for which I apologise to the Committee. Amendment No. 263 clarifies which clause is referred to in subsection (1)(b). There is nothing further to say about it.

Amendment agreed to.

Clause 44, as amended, ordered to stand part of the Bill.

Clause 45 - Questions to be decided on

Melanie Johnson (Labour, Welwyn Hatfield)

I beg to move amendment No. 179, in page 32, line 29, leave out '(5)' and insert '(6)'.

I can certainly address this amendment, which corrects a cross-referencing error. Our intention is to ensure that the Competition Commission includes in its report decisions on the appropriate remedies for any substantial lessening of competition that occurs. I urge the Committee to support the amendment.

Amendment agreed to.

Amendment made: No. 180, in page 32, line 48, after '(8)' insert—

'in a case where it has decided by virtue of subsection (2)(a) or (5)(a) that there is or will be a substantial lessening of competition,'.—[Miss Melanie Johnson.]

Clause 45, as amended, ordered to stand part of the Bill.

Clauses 46 to 50 ordered to stand part of the Bill.

Clause 51 - Restrictions on action where public

Andrew Lansley (Conservative, South Cambridgeshire)

You would not think it good, Mr. Conway, if I were to repeat the argument that I advanced in detail on clause 40. However, the Under-Secretary, my hon. Friend the Member for Eastbourne and I have pursued that argument for some time.

The 24-week period in the clause need not be so long and there would be much merit in making it shorter. The danger of providing for such a period is that it happens to coincide with the length of time allowed to the Competition Commission for its investigation. As the Under-Secretary says, it is a long stop. Having issued an intervention notice, the Secretary of State can consider how the order is to be made through Parliament and consult on it, almost until the very day on which the Competition Commission has to complete its investigation. If the Secretary of State backs out and the order is not finalised, the reference might fall.

It is inherently undesirable for the Secretary of State to use all the time available under that limit. The idea that action should be taken ''as soon as practicable'', found in clause 40(7), should also be applied under this clause, and the long stop should be a lesser period of time. The question is how long. I have not tabled an amendment, so I shall suggest something for the Under-Secretary to think about before Report.

Given that 12 weeks is the usual time allowed for Government consultation, and given that the Secretary of State must, at the time of the intervention notice, have a substantive idea of the grounds on which an order would be made, it seems reasonable that the period should be 12 weeks—or, at the most 16 weeks, if one adds 28 days for the laying of an order. If the Under-Secretary were to consider that, I should be satisfied.

Melanie Johnson (Labour, Welwyn Hatfield)

I shall give further consideration to that. I do not believe that our desires and the hon. Gentleman's are very different in this regard—should those things occur, they should be dealt with as expeditiously as possible. I would still need to consider whether a reduction in the time frame, and importing the same constraints, can be lived with, given the need to meet the parliamentary and other time frames that I mentioned a few moments ago. I shall reflect on it, but

I make no promises about the outcome. I shall simply bear in mind what the hon. Gentleman has said.

Question put and agreed to.

Clause 51 ordered to stand part of the Bill.

Clauses 52 to 54 ordered to stand part of the Bill.

Clause 55 - Duties of OFT and Commission

Jonathan Djanogly (Conservative, Huntingdon)

Clause 55 provides that the OFT and the commission should inform the Secretary of State if the so-called ''specified'' considerations apply, in which case subsection (2) comes into play and the Secretary of State becomes responsible for making decisions. That being so, it cannot be right, under subsection (1), that the OFT should decide whether any such consideration is immaterial. Surely, the decision should be made by the Secretary of State. If not, the Secretary of State should be able to review the OFT's decision. Under clause 55, the OFT is effectively being given the right to decide whether considerations are material. However, in the circumstances dealt with by the clause, that seems inappropriate.

Melanie Johnson (Labour, Welwyn Hatfield)

I want to ensure that the hon. Gentleman is aware that we want to be certain that representations are seen by the Secretary of State when relevant. The OFT will alert the Secretary of State to representations that a case that it is considering raises a specified public interest consideration, but will not if the representation appears immaterial. That is important because vexatious representations are possible. The OFT and the Competition Commission will alert the Secretary of State to any calls for new public interest considerations, and they will not be case specific. I hope that I have answered the hon. Gentleman.

Jonathan Djanogly (Conservative, Huntingdon)

That does not answer my point. Clause 56 deals with ''specified considerations'' such as national security. In such situations, how can it be right that the OFT should be able to decide whether something is material? Surely, when national security is involved, the Secretary of State should have the right to decide whether something is material. She will not know, because she will not necessarily have been told about it if it is deemed immaterial.

Melanie Johnson (Labour, Welwyn Hatfield)

The discretion is not to alert the Secretary of State to representations. As I said, that is sensible flexibility for the OFT when it believes that the Secretary of State would not want to consider a matter. It is important that we do not build in features that can be abused by those who simply seek to clog up the regime. That would be in no one's interests.

Jonathan Djanogly (Conservative, Huntingdon)

How would the Secretary of State know whether he or she would not be interested in such a matter?

Melanie Johnson (Labour, Welwyn Hatfield)

It is for the OFT to judge, as is the case for many other issues, when it believes that the Secretary of State should not want to consider a

matter further. Representations on public interest matters can be made to the Department of Trade and Industry, as is likely to take place in practice.

Mark Field (Conservative, Cities of London and Westminster)

Will the hon. Lady give us guidance on where in legislation a similar clause applies—effectively letting a public body such as the OFT take discretion out of the hands of a Minister? It seems a peculiar state of affairs for the OFT to second-guess what a Minister might think is material, yet that Minister can in no way make a decision on the subject because he is unaware of the facts that might give rise to it. I assume that the clause has been taken from some other Act that refers to the interaction of a public body with a Ministry. If that is not the case, I would be intrigued to know how such a clause has come out of the ether.

Melanie Johnson (Labour, Welwyn Hatfield)

Opposition Members are making rather heavy weather of the provision. The DTI and the Secretary of State are likely to be made aware of significant public interest matters. In those circumstances, if the matters are genuine rather than specious, it is unlikely that the OFT would do anything other than assume that Ministers would be interested in how those matters were pursued. We are not removing the discretion of Ministers, but the representations that they receive will be filtered. As I am sure Opposition Members are aware, some such representations may be made out to be material when they are not. People will argue that something is material when it is not if they think that it will get them through a different loop in the system. That is the only point at issue.

Mark Field (Conservative, Cities of London and Westminster)

Do we not have to take great care, particularly in relation to issues of national security? Perhaps we are dancing on the head of a pin, but the great concern among Opposition Members is that the provision will be used by a Minister to justify events post facto. A Minister or a Government could easily use it as an excuse to suggest that officials decided that no material consideration was needed, so the matter never reached the Minister's desk. Then the Ministry would have ignored something that could, after the events had all come to pass, be justified in the longer term as a glaring issue of national security. The Opposition are concerned that a Government could use the provision as a charter to avoid taking responsibility.

Melanie Johnson (Labour, Welwyn Hatfield)

The hon. Gentleman assumes that the Ministry of Defence will sleep through such matters, but it will do no such thing. It will be alert to possible issues and will advise on those that could be of concern to national security. That anxiety is likely to be fully met by the role of the MOD in the process.

Jonathan Djanogly (Conservative, Huntingdon)

Is the Under-Secretary suggesting that the MOD will review all the OFT's decisions, to consider whether they are in the national interest? I think not, which rather proves the point. The argument has become circular. It has been pointed out that the Secretary of State, rather than the OFT, should decide what is in the national interests. It is worth remembering that the OFT is made up of business men and academics. The Secretary of State should make such decisions.

I shall leave the matter there, as the arguments have been clearly set out, but for one further question. If we accept that we have a circular argument, will the Minister please clarify what she considers to be material or immaterial?

Melanie Johnson (Labour, Welwyn Hatfield)

The hon. Gentleman's request is very wide ranging. I have already discussed the nature of materiality and given some examples. For example clogging up the system and vexatious behaviour are examples of non-material issues. I cannot give the hon. Gentleman some sort of list that summarises materiality; it will have to be considered case by case, as many issues need to be considered in context.

Jonathan Djanogly (Conservative, Huntingdon)

I want to return to the point. What happens if, after the OFT has decided that something is immaterial and, therefore, need not be put to the Secretary of State, it is shown to be material and should have been discussed in a wider context, for example, in the House?

Melanie Johnson (Labour, Welwyn Hatfield)

I assume that there would be some further discussion about how that had come to pass, but I do not envisage that ever taking place. The hon. Gentleman is trying to tempt me down the path of hypotheticals when the provision is designed to ensure that things work well, that issues are not considered unnecessarily and that we make sure that the right people, including the Ministry of Defence, have an input. I am at a loss to envisage the sort of circumstances to which the hon. Gentleman refers.

Tony McWalter (Labour/Co-operative, Hemel Hempstead)

As a codicil to the debate, there is something in what the hon. Member for Huntingdon says. If, for example, a company that produces titanium were trying to merge with a company that produces aluminium, that might not instantly attract anyone's attention. But let us suppose that some new technology is creating a titanium-aluminium alloy, which happens to be particularly useful for gun casings. In that case, I can imagine that the OFT might lack the technical expertise to see what was happening, which could give rise to problems of national security. However, if wider knowledge were available to the Under-Secretary—I speak as a Member of the Science and Technology Committee—it might alert her to what was happening. The Under-Secretary should bear in mind that that point might equally be expressed from the Labour Benches.

Melanie Johnson (Labour, Welwyn Hatfield)

My hon. Friend raises a more specific case, which is helpful. The OFT will issue invitations to comment on all the cases that it investigates, so there will be plenty of opportunity for people to comment. I have never found that people were backwards in coming forwards with their views on the importance of various courses of action.

Question put and agreed to.

Clause 55 ordered to stand part of the Bill.

Clause 56 - Specified considerations

Andrew Lansley (Conservative, South Cambridgeshire)

Some of the matters that we have discussed are relevant here, but I do not want to go over them again. Having examined the cart in detail, we come to the horse. The question is to which areas the decision-making attributes should be applied. I have established something that I had not previously fully understood—the Secretary of State is proposing a special decision-making procedure, to be applied to national security in the first instance. Under that procedure, if the Secretary of State believes that there is a national security consideration, she can issue an intervention notice, enabling that consideration to be taken into account alongside the competition grounds.

The Office of Fair Trading may declare that there are no competition grounds and may even advise that no reference to the Competition Commission be made on the public interest grounds raised in the intervention notice. However, the Secretary of State can go ahead with the reference and can also, as I understand it, contradict a report from the Competition Commission that states that there are no competition grounds and no adverse effect on the public interest. The Secretary of State can maintain that there is such an effect and that there must therefore be a remedy. As far as I can see from the rest of the Bill, she can seek her own remedy rather than being constrained to follow any remedy set out by the Competition Commission.

We are contemplating a merger regime quite different from the provisions under the Fair Trading Act, which this Bill is designed to replace. Under those provisions, if the Secretary of State thought that there was a public interest, he or she could force a reference to be made even if the OFT advised against it, but was constrained by the decision of the Monopolies and Mergers Commission. If the MMC found that there was no adverse public interest, that was the end of the matter.

The new regime is quite different. Perhaps I am particularly slow, but I had thought that the Secretary of State was simply proposing to leave the public interest criterion in relation to national security in the legislation, so that it would apply in much the same way—that she was merely proposing not to narrow the test to competition.

However, we are dealing with a different approach to the public interest. It may well be appropriate to apply this different test to national security, because the Secretary of State may well take a different view from the Office of Fair Trading and be right to do so. As my hon. Friend the Member for Huntingdon said, the various economically or business-trained members of the Competition Commission may not appreciate considerations of national security to the extent that Ministers have to.

Ministers have ultimate responsibility for national security, so they may well entirely substitute their view for that of the competition authorities, but in terms of any national interest other than that of national security it becomes difficult to justify the Secretary of State's reserve power to intervene and to cause the matter to be investigated by the Competition

Commission. However, the measures go much further. The Bill proposes a power that would allow the Secretary of State not only to cause a reference to be made and an investigation to be undertaken into such a merger, but to substitute his or her view of the public-interest aspects of that investigation for that of the Competition Commission.

We debated an amendment that would have limited the Secretary of State's ability to impose his or her views. In this debate we should recognise that if the Minister is saying that she and her colleagues would not contemplate adding to the power in section 56, it is probably incumbent upon them to contemplate not giving themselves the power to go beyond national security, or, as it is defined in the EC merger regulations, public security. It is an excessive power in relation to any factor other than national security.

Harry Barnes (Labour, North East Derbyshire)

What worries the hon. Member for South Cambridgeshire because it is a faint possibility worries me because it does not clearly specify that the public interest should be considered. I pursued the public interest argument when we debated amendments Nos. 126 and 129 in our seventh sitting. That is why I did not move amendment No. 262, which was tabled in my name. It would have applied the public interest consideration to the Secretary of State, whereas the previous amendment would have applied it to the OFT. Both of those are especially important given the points made by my hon. Friend the Under-Secretary on clause 43. I shall follow that argument very carefully, but that is why I felt that I should not move my amendment at that particular time. Nevertheless, I still have a great deal of interest in the public interest.

Nigel Waterson (Conservative, Eastbourne)

My hon. Friend the Member for South Cambridgeshire has elegantly rehearsed the argument about extending the public interest exception beyond national security. As I said when we debated an amendment at some length—I do not want to repeat those arguments—we are far from satisfied. The Under-Secretary is saying that no one in her Department can conceive of any circumstances, not matter how hypothetical, in which that power might be extended, but at the same time she is utterly determined to keep it in the Bill. That is a major concern, not least because it calls for a wholly different regime and philosophy from that in the rest of this part of the legislation, which is something that the Library brief helpfully makes clear. Again, we have made the point, which bears brief repetition, that if we are all in favour of keeping ministerial involvement to a minimum, the exception has to be extremely narrow.

I do not want to rehearse the arguments deployed by my hon. Friend and I want to focus on what is in the Bill as opposed to what might be in clause 56, or other clauses, at some time in the future. We are told that the concept of national security is based either partly or wholly—again, I should like that to be clarified—on the phrase ''public security'', which, once again, crops up in the EC merger regulations. I would be grateful if the Minister would give us some guidance on how that phrase is defined.

We have all advanced the debate on the basis, which is almost an assumption, that national security

is a defence matter. The hon. Member for Hemel Hempstead (Mr. McWalter) gave the example of defence equipment contracts, but national security could also involve terrorism.

Jonathan Djanogly (Conservative, Huntingdon)

Superguns.

Nigel Waterson (Conservative, Eastbourne)

My hon. Friend's mention of superguns is a helpful reminder of an episode that is not long past. We know, because we have been told, that people such as al-Qaeda have—rather like Al Capone in the 1920s—moved sharply into legitimate business in all sorts of ways, which include buying ships and no doubt buying some of the things that go into those ships, such as terrorist materials. International terrorism is another national security consideration.

The mainstream concern about which we all assume that we are talking is defence, which concerns this country's ability to continue to make equipment for our armed forces and to have access to such equipment to provide for our national defence. That opens up the question, which my hon. Friend the Member for South Cambridgeshire has raised more than once in Committee, of how we approach foreign companies. We are looking at preventing state defence secrets from being exported from these shores through mergers.

Those are the narrow concerns. The production of equipment used by the intelligence community is another possible area of concern. I would hope that the Under-Secretary and those who advise her have a series of categories, examples or merely rough scenarios that they have thought through in that context. I would like to press the Under-Secretary. Is the process any more elastic than I have suggested, or is it as I have described? Does public security mean something subtly different from what the clause describes as national security?

I can only endorse what my hon. Friend the Member for South Cambridgeshire has said and emphasise the tremendous concern in my party not just about the lack of certainty for business—I have gone into that before—but the sheer matter of principle that a narrow and important exception should become so elastic, in what can be added by subsequent Secretaries of State, when no one could envisage any circumstances in which that might happen.

Melanie Johnson (Labour, Welwyn Hatfield)

Members of different parties have different desires in relation to such matters, but the Government are clear about why they are pursuing their line. I have reassured Opposition Members when debating earlier clauses that we have no intention of adding anything. We have attempted to make sure that the unforeseen can be dealt with because it is, indeed, unforeseeable. Opposition Members want to envisage something unforeseen, but cannot. The unforeseeable often comes around the corner to surprise hon. Members and Ministers.

Andrew Lansley (Conservative, South Cambridgeshire)

I acknowledge that it is difficult to deal with matters that are purely theoretical. However, let me put it to the Under-Secretary that I was pointing out—it would be helpful if she would respond—that if national security is in a category of its own, the

provision should apply to national security. At the risk of making a complex Bill even more complex, does she accept that any consideration of public interest that does not concern national security should be dealt with not in this way, but in a way akin to the former merger reference procedure under the Fair Trading Act? In that instance, the Secretary of State could not make decisions about what is in the public interest according to her subjective criteria, but only by reference to the decisions of the Competition Commission.

Melanie Johnson (Labour, Welwyn Hatfield)

The hon. Gentleman makes a number of assumptions. His suggestion that we have two separate regimes would complicate the matter, particularly because neither he nor I could foresee whether any matter that was subject to provisions in this and related clauses was closer to national security than the other matters to which he suggests it should be likened under the normal procedures. We cannot speculate because we do not know.

The Competition Commission's competition expertise will be used in all cases. The Secretary of State is an appropriate person to have a final decision on the public interest test because it is the Secretary of State who is responsible for wider matters of public interest and has wider accountability through Parliament.

In relation to the interesting discussion about the definition of national security, it is important that the Secretary of State can intervene where necessary to protect national security. I think that all hon. Members would agree. I do not think that national security should be so tightly defined as to be considered on a case-by-case basis. National security primarily concerns defence issues. It includes public security, but only matters of great importance to the state. As the hon. Member for Eastbourne said earlier, national security is like an elephant: one knows it when one sees it.

Andrew Lansley (Conservative, South Cambridgeshire)

On this occasion, I am afraid that the Under-Secretary is not even close to a good argument. If it is national security, it will be specified in clause 56. If it is not national security, it will have to be separately specified. We are discussing a hypothetical situation—one that the Under-Secretary must envisage, although she cannot say what form it might take—in which public interest considerations that are not national security considerations might give rise to the Secretary of State wishing to amend section 56.

The Under-Secretary has not given me a good reply. The Bill should be amended so that, although circumstances may give rise to the Secretary of State's concern such that she would issue an intervention notice and amend section 56—she might even override any recommendation from the Office of Fair Trading and cause a reference to be made to the Competition Commission—the other public interest criteria should be determined by reference to the advice of the Competition Commission, as is the case in the Fair Trading Act now.

I am afraid that the moment that the Under-Secretary talks about the final arbiter of public interest, she is indicating that many years ago we

should have amended the Fair Trading Act so that the Secretary of State could override the Monopolies and Mergers Commission reports when they were received. Even if the MMC said that a merger was not against the public interest, the Secretary of State could have simply overridden it. That would have moved merger policy in this country in the opposite direction to the one that the Government profess to believe to be right.

Tony McWalter (Labour/Co-operative, Hemel Hempstead)

Surely the hon. Gentleman would agree that there may be major civil emergencies of various sorts. Certain activities may threaten the purity of the water supply or the air or possibly heavily contaminate the biosphere. Potentially, several situations could be as alarming for a Government as, say, a threat by enemy action. For instance, a merger might create a rather irresponsible company that the Government might view as a threat. Does the hon. Gentleman accept that such a case would have to be included in the parameters of the Bill?

Andrew Lansley (Conservative, South Cambridgeshire)

No, I do not think that I do accept that. I do not have the definition in front of me, but I suspect that the public security definition under the EC merger regulations is wide enough to deal with major threats such as water supply contamination and so on. If it is not, and if the Secretary of State wishes to amend the measure to give that as a cause for an intervention notice, I see no reason why on such grounds the Competition Commission is not competent to advise her—in effect, to make a decision for her. I fail to see why the Secretary of State should be able to override it.

The classic case from the past is the series of references made by the then Secretary of State under the Lilley doctrine, to which I referred earlier, in relation to foreign ownership. If I recall correctly, four references were made against the advice of the Office of Fair Trading. In almost all of those cases, the MMC did not uphold the reference but found that there was no adverse public interest. In effect, the then Secretary of State and the subsequent one were deflected from that part of the policy.

That may or may not be right; I shall not debate the merits of it. The point is that the Secretary of State believed one thing, but the MMC believed another on the basis of what was regarded in the wider marketplace as more objective grounds. Let us accept that national security occupies a sui generis position and that the Government cannot delegate responsibility for its maintenance. However, it is perfectly reasonable for Ministers to delegate what is not national security to the Competition Commission in just the same way as they have delegated the responsibility to reach a conclusion about such matters to the Monopolies and Mergers Commission.

Melanie Johnson (Labour, Welwyn Hatfield)

There is not much more that I can add to help the hon. Gentleman. I do not think that where we want to go and why we want to go there are very different in essence from what he is arguing for. The only area of dispute between us concerns what happens if something unforeseen crops up. He would

like there to be no provision for any unforeseeable circumstances, but I say that there is a need to ensure that unforeseen circumstances can be dealt with.

Andrew Lansley (Conservative, South Cambridgeshire)

To—I think—correct the Under-Secretary, I am not saying that there should not be provision for unforeseen circumstances. What I am saying is that, if the Under-Secretary wants to provide for unforeseen circumstances, she should do so through the mechanism of a reference to the Competition Commission, and allow the Commission's decision on whether something operates against the public interest to be the determining decision.

Melanie Johnson (Labour, Welwyn Hatfield)

There is clearly a difference between the Competition Commission, whose role relates to competition matters, and those best placed to judge public interest. The Secretary of State and this House, with its accountability role, are in a better position to judge those issues than the Competition Commission, whose expertise lies in the competition field.

Andrew Lansley (Conservative, South Cambridgeshire)

The Under-Secretary is now trying to set on its head the whole basis upon which she is bringing this section of the Bill before us. Ministers have determined in the past that the MMC can make decisions based on public interest criteria—not only competition matters, but public interest grounds have been presented to the MMC. Ministers said, consistently over time, that they felt that the MMC took decisions that were objective and more predictable in the marketplace, and that they wanted to go down the path of increasing such independence. It follows logically from that that if unforeseen circumstances give rise to public interest grounds for a reference, the Competition Commission, like the MMC, is a perfectly acceptable vehicle for determining them.

Melanie Johnson (Labour, Welwyn Hatfield)

The hon. Gentleman and I will have to agree to differ on that point. I am listening to him carefully, but I do not believe that he is making a case for doing anything other than what we are doing. He is failing to tackle the question of how exactly, under the arrangements, he would deal with things that might be akin to national security but not be national security. He cannot say whether something that crops up that neither he nor I can foresee will be more akin to that and therefore ought to be dealt with by the route set out here rather than the route that he is advocating of simply going through the Competition Commission.

Question put and agreed to.

Clause 56 ordered to stand part of the Bill.

Clause 57 - Intervention by Secretary of State

Nigel Waterson (Conservative, Eastbourne)

I beg to move amendment No. 260, in page 40, line 10, leave out ''special''.

This probing amendment raises a narrow point. The clause is a discrete little regime for dealing with mergers that basically involve defence contractors who may, in the course of business, have access to secret information. We accept that there are grounds for vetting those companies, perhaps more carefully than

other companies. However, we are slightly puzzled that what is called a ''special merger situation'' is defined by reference to the normal definition but omitting the thresholds—25 per cent. UK market share or £45 million turnover—set out in clause 20 that we debated earlier.

The problem that we are trying to deal with under this clause is entirely divorced from competition, or any other issue that might legitimately be called enterprise. I am trying to probe the Under-Secretary on exactly how the clause is engineered, to confirm that it is simply a matter of being able to prohibit a merger on the grounds of secrecy of information. Can she confirm that there is no intention to have issues of competition and enterprise involved in what I accept is a discrete regime to deal with that particular group of contractors?

Melanie Johnson (Labour, Welwyn Hatfield)

I take it that the amendment is probing, which the hon. Gentleman has confirmed. To date, we have had no representations. The purpose of the special public interest provision is to ensure that mergers of certain enterprises with special defence-related Government contracts can be investigated, even though they fall short of the competition thresholds. That provision applies to a small, narrowly defined subsection of merger cases, which have been developed to work under ministerial discretion, as with other public interest cases. However, unlike other national security cases, they will not be scrutinised on competition grounds as they do not meet competition thresholds. The amendment would remove the Government's ability to consider those special cases. That ability should exist, so I trust that in light of my explanation the hon. Gentleman will feel able to withdraw the amendment.

Nigel Waterson (Conservative, Eastbourne)

I am happy with that explanation. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 57 ordered to stand part of the Bill.

Clauses 58 to 64 ordered to stand part of the Bill.

Clause 65 - Newspaper mergers

Melanie Johnson (Labour, Welwyn Hatfield)

I beg to move amendment No. 264, in page 46, line 16, after 'assets' insert—

'to which section 58(1) of the Fair Trading Act 1973 (c.41) applies'.

Derek Conway (Conservative, Old Bexley and Sidcup)

With this it will be convenient to take Government amendment No. 265.

Melanie Johnson (Labour, Welwyn Hatfield)

Amendment No. 264 introduces more targeted wording to define the scope of the Enterprise Bill regime. The intention is to ensure that the regime applies to mergers that involve the transfer of newspapers or newspaper assets, which meet the general merger thresholds, and which the Secretary of State does not refer under the newspaper merger provisions of the Fair Trading Act 1973. Amendment No. 265 is textual and consequential on the lead amendment.

Jonathan Djanogly (Conservative, Huntingdon)

We have a rather strange little clause here and the Government amendments, which refer to the 1973 legislation, make it even stranger. In such comprehensive legislation on competition law, one wonders why the opportunity has not been taken to move the relevant clauses from the 1973 Act into the Bill for the purposes of completeness and simplicity.

Melanie Johnson (Labour, Welwyn Hatfield)

During the consultation on merger reform, we said that the newspaper regime would be considered separately. The Government believe that the newspaper regime should be retained to address plurality concerns, but that it should be better targeted. The regime targets public interest concerns additional to competition, which justify the continued involvement of Ministers. We believe that the proposals in the draft communications Bill will be seen as significantly deregulatory, but we cannot give details before publication. Our approach in making provisions is appropriate.

Andrew Lansley (Conservative, South Cambridgeshire)

I have reached the point of pedantry. The purpose of Government amendment No. 265 seems to be to bring the reference to the Fair Trading Act 1973 Act in clause 65(2) into line with the same reference in subsection (3), so that they both refer to the ''Act of 1973''. However, clause 261, which covers interpretation, defines not the ''Act of 1973'' but ''the 1973 Act''. We should be consistent and have either ''the 1973 Act'' or the ''Act of 1973''. I fail to see why we should have both.

Melanie Johnson (Labour, Welwyn Hatfield)

Is it for me to comment on the hon. Gentleman's self-confessed pedantry?

Jonathan Djanogly (Conservative, Huntingdon)

Given that the Government propose to review the merger legislation relating to newspapers, will the Under-Secretary give us further information on when that is likely to happen? Why do we have to make changes to the legislation now? Why can we not consider it in one go, as the Under-Secretary suggested?

Melanie Johnson (Labour, Welwyn Hatfield)

As I said, we believe that the proposals in the draft communications Bill will be seen as significantly deregulatory, but I cannot provide any more details prior to publication to help hon. Members in their wider interest in the subject. The competition focus of the Bill is important and an announcement on newspapers will be made in the near future.

Amendment agreed to.

Amendment made: No. 265, in page 46, line 17, leave out

'Fair Trading Act 1973 (c.41)'

and insert

'Act of 1973'. [Miss Melanie Johnson.]

Clause 65, as amended, ordered to stand part of the Bill.

Further consideration adjourned. [Mr. Pearson.]

Adjourned accordingly at two minutes past Seven o'clock till Wednesday 1 May at half-past Ten o'clock.